Don't let it get away!

SodaStream (NASDAQ: SODA) used to excite investors ahead of posting blowout quarterly results, but that's unlikely to happen when the global leader in home carbonation reports tomorrow morning.

The stock fell to a 52-week low earlier this month, a couple of weeks after hosing down expectations for its holiday quarter. Its full-year guidance implies that revenue growth will decelerate to a 26% clip for the fourth quarter. That's not too shabby, especially with Coca-Cola (NYSE: KO) and PepsiCo (NYSE: PEP) reporting net revenues declining by 2% and climbing 1%, respectively, during the same period.

Coming up a bit shy of top-line expectations isn't fatal, but the real dagger in last month's SodaStream warning was that it expects to barely break even during the current quarter.

SodaStream has some serious margin issues. The Israeli-based company behind the namesake machine that turns water into carbonated beverages stumbled during the previous quarter when syrup sales fell far short of its starter kits and carbonator refills. The conclusion at the time was that they were selling briskly, going by the healthy uptick in soda-maker sales, and being used by those who own them, judging by the CO2 sales. However, the weak sale of flavors suggested that folks were using other ways to sweeten their sodas or just fancying unflavored seltzer more than before.

We already know that margins will be a problem given the sharp drop in profitability provided in last month's update. We don't know if flavor sales will bounce back, though as a high-margin item for SodaStream, it probably wouldn't be a shock to see some struggles there.

SodaStream's stock started to bounce back earlier this month when Coca-Cola took a 10% stake in Green Mountain Coffee Roasters, signing up a long-term deal to provide flavors for the Keurig Cold machine that will hit the market as early as this holiday season but likely at some point during the first nine months of next year. Having the world's soft-drink giant back a Green Mountain carbonation platform that isn't even on the market could've scared investors, but it helped increase the chatter that surfaced last year about PepsiCo buying SodaStream. Even if a buyout seems unlikely, if Coca-Cola is getting into home carbonation, PepsiCo can validate SodaStream's platform by partnering with it to take on its fizzy rival on a new battlefront. However, even that fizz is starting to run flat. After spending nine consecutive trading days closing above $40, the stock fell through that floor yesterday.

The silver lining here is that the stock is trading sharply lower than it was just a couple of months ago. A lot of the bad news that will be disclosed before the market opens tomorrow is already priced into its shares. This doesn't mean that an overdue pop is coming tomorrow. Between the weak earnings and the looming threat of Green Mountain's Keurig Cold, SodaStream's going to have to earn back its fizzy ways.

Source: SodaStream.

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Rick Munarriz owns shares of Green Mountain Coffee Roasters and SodaStream. The Motley Fool recommends Green Mountain Coffee Roasters. It recommends and owns shares of Coca-Cola, PepsiCo, and SodaStream. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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Rick has been writing for Motley Fool since 1995 where he's a Consumer and Tech Stocks Specialist. Yes, that's a long time. He's been an analyst for Motley Fool Rule Breakers and a portfolio lead analyst for Motley Fool Supernova since each newsletter service's inception. He earned his BBA and MBA from the University of Miami, and he now lives a block from his alma mater.
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